Virtual Net Metering - Solar for Apartments

Step 1: Understand Your Motivations – Understand Your Site

When first considering solar electric power, it’s important to understand your project objectives. Whether your goal is to provide solar access to tenants, lower energy costs for tenants and common area loads or increase your property’s value and appeal – all are achievable with solar utilizing virtual net metering (NEM-V). It is a utility rate structure designed for multitenant, multimetered properties and allows numerous tenants to share a single solar photovoltaic (PV) system and receive direct on-bill utility savings.

Understanding your site is an important first step. System size, location and surrounding obstacles may affect the performance of a solar PV system, so you should start by assessing your site’s viability for solar. Later, in Step 5, we discuss the process of identifying a knowledgeable contractor who will subsequently conduct a comprehensive site assessment. The Solar Site Considerations worksheet provides direction for conducting a preliminary self-assessment. In addition to rooftop installations, ground-mounted systems and carport systems also may be considered.

Step 2: Determine which Tenants will Go Solar & Building Energy Load

A solar electric system can be sized to serve the entire building load or specific units within a building.

As the property owner, you will decide which units are to receive a portion of the solar electricity credit, allowing the benefit of reduced utility bills for those tenant units and common areas.

Once you have decided which units and accounts will be included, you will need to understand the annual consumption in kilowatt-hours (kWh) of those units.

Do it yourself: Have participating tenants sign a release form, which will allow a designated representative to have access into past kWh consumption levels from the utility. Access the appropriate release form for your utility territory.

Use national averages: Studies show that an apartment household in Western states has an average electric consumption of 5,442 kWh/year.[1]

Use the Solar Participation Worksheet to track each unit’s annual kWh consumption, which will assist with the Step 3 exercise of determining the approximate system size.

[1] Average energy consumption data provided by the U.S. Energy Information Administration, Office of Energy Consumption and Efficiency Statistics, on Forms EIA-457 A and C-G of the 2009 Residential Energy Consumption Survey.

Step 3: Estimate System Size & Determine Solar Allocations

Estimating System Size

Once the participation structure and associated annual energy consumption have been determined, you can translate that information into an approximate system size needed and calculate the percentage of the total kWh production that will be applied to each unit or “benefitting account.”

Remember that you do not have to offset 100% of the consumption of your building. Offsetting any portion can be beneficial and a good way to get started with solar. A rule of thumb is to divide your annual consumption (kWh) by 1,700 kWh/year (1 kW of solar will generate about 1,700 kWh/year). This will give you an approximate system size to base your design on.

Contractors may use supplemental formulas and calculators to determine the approximate production of their proposed system. For an initial understanding of your site’s needs prior to contacting a contractor, the general rule of thumb method can be used.

Unit Number

Annual kWh Consumption

Desired Offset of Total Consumption

Annual Solar kWh Needed for Desired Offset

Common area

1,000 kWh

85%

850 kWh

Unit A

5,500 kWh

85%

4,675 kWh

Unit B

6,500 kWh

85%

5,525 kWh

Unit C

7,000 kWh

85%

5,950 kWh

Unit D

8,000 kWh

85%

6,800 kWh

TOTAL

28,000 kWh

85%

23,800 kWh

23,800 kWh/1,700 kWh = 14 kW solar electric system

Determining Unit Allocations

Each benefitting account will need to be assigned a percentage of the total monthly kWh production that will be credited to their utility account (“unit allocations”).

There are a number of methods to determine unit allocations, such as using historical consumption data to determine the respective percentage (Example 1) or a more generic allocation, based on the number of bedrooms or square footage (Example 2).

Example 1

Example 2

Benefitting Account

Percent Allocation

Benefitting Account

Percent Allocation

Common area

3.57%

Common area

10%

Unit A (1br/1ba)

19.64%

Unit A (1br/1ba)

20%

Unit B (1br/1ba)

23.21%

Unit B (1br/1ba)

20%

Unit C (2br/2ba)

25.01%

Unit C (2br/2ba)

25%

Unit D (2br/2ba)

28.57%

Unit D (2br/2ba)

25%

Total

100%

Total

100%

Step 4: Review Financing Options & Recoupment Methods

The cost of solar in California ranges from $4 ‒ $6 per watt (AC).[1] Remember, 1 KW is equal to 1,000 watts.

As an apartment building owner, you have access to a variety of financing methods for installing a solar electric system. When reviewing the typical financing products available, keep in mind personal considerations such as existing capital, federal tax repercussions, property value and other items.

As the primary investor, you also will need to determine your method of recouping your investment from tenants, while still allowing them to see an overall net savings each month.

Example: If the tenant will save around $100 each month on their utility bill due to the solar bill credits, the property owner could consider raising the monthly rent by $75. This allows the property owner to recoup the investment incrementally each month, while still allowing for the tenant to see a 25% net savings.

The method you choose to recoup your investment from tenants may vary based on the financing product you choose to use. The most common financing options include cash purchase, solar lease or a power purchase agreement (PPA).

Table 1: Cash System

A cash purchase can be made using existing capital or by taking out a loan. Some loan options include HELOQ loans, solar loans and PACE loans. Visit Clean Energy Financing to learn more about green financing options in California.

Ownership of system?

Yes

Access to federal investment tax credit?

Yes

Methods for recouping cash investment

Increase rent by a portion of utility savings

Separate monthly "energy" fee

Other considerations

Can use upfront capital or loan

System owner responsible for O&M

Potential for increased property value

Table 2: Leased System

A lease arrangement entails a fixed monthly payment. This monthly payment would ideally be less than the current monthly utility electric bill.

Ownership of system?

No

Access to federal investment tax credit?

No

Methods for recouping investment/paying lease

Increase rent proportionally

Separate monthly "energy" fee

Other considerations

Typically 20-year lease duration

In general, little or no upfront costs

Not responsible for O&M

Possible performance guarantees

Table 3: PPA System

A power purchase agreement entails a fixed price/kWh produced paid monthly. This price/kWh should be less expensive than the price/kWh paid to the utility.

Ownership of system?

No

Access to federal investment tax credit?

No

Methods for recouping investment/paying PPA

Separate monthly kWh fee

Other considerations

Typically 20-year PPA duration

Not responsible for O&M

Performance guarantees

Another emerging financing option is a roof income agreement, or the “rooftop lease model.” This entails a third-party financier leasing the roof from the property owner to install a solar system and setting individual PPAs with participating onsite tenants. Property owners can realize additional savings by including common area accounts in the solar agreement.

Step 5: Find a Contractor

Locating a reputable, knowledgeable contractor can be a daunting task for any home improvement project. The Center for Sustainable Energy has partnered with EnergySage to develop an online solar marketplace specifically designed for multifamily property owners. Visit the site below to request and receive multifamily solar bids directly and easily through the online platform. High-quality, prescreened solar installers will compete for your business.

Other general resources include:

CALSEIA Member Directory – This directory includes contractors and industry professionals who are members of the California Solar Energy Industries Association. Members abide by the CALSEIA Code of Ethics and have been vetted by the organization.

GoSolar California - This database includes all solar contractors who have submitted a net metering application within SCE, SDG&E or PG&E service territories.

Referrals from neighbors or other solar customers are always a great way to choose a contractor.

Contractors State License Board ‒ Use this state agency page to see the type and current status of a contractor’s license. It also includes bond and workers compensation information and, if applicable, any consumer complaints or disputes along with the resolution.

Do they have references and a good reputation within the community?

Do they have experience with designing solar projects for multifamily dwellings? If not, what are the reasons they feel confident taking on this project?

What is the cost/watt (AC) they have proposed?

Does this fall within the average cost for solar? (See Step 4.) If not, what are the reasons for under/over bidding?

Step 7: Ongoing Monitoring & NEM-V Management

After the installation is complete, there are ongoing management activities that should be tracked.

System performance monitoring is important for ensuring that the system is producing electricity consistently, as well as understanding if the system is producing above or below original expectations.

In an instance of low performance or system failure, identifying the problem quickly, in addition to timely troubleshooting, will be important for maximizing tenant and common load savings, and also for avoiding customer complaints due to higher utility bills.

Specific system monitoring packages may be included in your system design and, in general, can be monitored online. Ask your contractor about system performance monitoring packages that would work best with your system.

Tenant turnover and unit vacancy also are aspects of a project’s post installation management. Generally, the solar allocations associated with a vacant unit will be assigned to the common load meter during the time of vacancy. This default account is defined on the unit allocation spreadsheet submitted to the utility.

Following are fees associated with set up and early modifications to the unit allocations before the relevant time period is complete.